Mortgage Lending at 10 Year Low

by Mark Johnston

A new report is showing that mortgage lending is at its lowest point in the last 10 years. The report highlights that Octobers figures are the worst in the past ten years due to the struggling UK housing market.

Almost £12.5 billion was lent by banks and building societies throughout the month which is around the same amount when compared to last month and around 10% down on this time last year. The Council of  Mortgage Lenders (CML) pointed out that the figures were the worst they  have ever recorded since it started to track mortgage lending back in the year 2000. The figures look worse then last month as the market usually seems a spike at this time of year as buyers try to complete before the Christmas period.

The head of lending at the Mortgage Advice Bureau, Brian Murphy commented on the situation by saying: “In a normally functioning market you would expect to see an uplift in overall activity between September and October following a plateau in the summer months. But this isn’t a normally functioning market. Borrowers are nervous, even more so since the spending review and confirmation of some half-a-million public sector job losses. This fear for their personal circumstances has contributed towards the drop-off in mortgage applications.”

Peter Charles from the Council of Mortgage Lenders (CML) went on to say: “There is a lower level of mortgage arrears and possessions, reflecting the significantly lower incidence of job losses and, in particular, the marked difference in the path of interest rates.Inflation is expected to remain below the Bank of England’s 2% target rate through 2012 and 2013, and with interest rates rising only slowly and little change in the level of unemployment (as the expansion of private sector employment offsets public sector job cuts), the implication is that mortgage arrears will remain well below previous peak levels.”

The report looks bad many as rents continue to rise whilst mortgage lending dries up for many first time buyers looking to get a foot on the UK property ladder.

The balance of cost between home ownership and renting has now switched because of the continued decline in house prices and the rising rents which have been a product of the lack of mortgages available to first time buyers. Would be home owners are now forced to rent which has put considerable pressure on the private rental market, in turn pushing up prices.

James Moss, the managing director of  London’s independent market leader in specialist residential investment, Curzon Investment Property, said: “Without access to finance buyers cannot purchase homes, and with the situation likely to get worse there is every chance we could see another fall in house prices. The only thing keeping prices stable is the government’s woeful lack of a coherent housing policy – the coalition is building even less than under Gordon Brown. Combine this with rising student fees and job losses across the public sector and what we’re left with is Britain facing up to being a nation of renters as the home buying dream is eroded by another parliament of botched housing solutions and little access to finance.”



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